Are high-interest debts holding you prisoner? Justin Gaines and I, John Prober, have joined forces to arm you with a financial maneuver that could set you free faster than you ever imagined. We're not just talking about throwing money at your debt and hoping it shrinks—we're sharing a power-play using balance transfers to outsmart sky-high interest rates. By swooping in with zero percent introductory offers, you could slice through your debt like a hot knife through butter. But beware, this isn't a game for rookies; a sharp eye for the fine print and a robust credit score are key. We're pulling back the curtain on our own money-saving escapades, revealing how even the most daunting student loans can be tamed by transferring to a cunningly chosen credit card.
Put on your financial strategist hat because this episode is a master class in managing your money like a Wall Street pro. We don't stop at just tackling debt; we're also illuminating how you can parlay those savings into investment triumphs. Imagine redirecting dollars from your debt snowball into a growing Roth IRA nest egg—now that's what we call financial wizardry. Justin and I aren't just preaching theory; we've lived it, and we're laying out our blueprint so you can too. So gear up for insights that could redefine your financial future, and join us for a journey that could lead you to a land of prosperity and security.
Are high-interest debts holding you prisoner? Justin Gaines and I, John Prober, have joined forces to arm you with a financial maneuver that could set you free faster than you ever imagined. We're not just talking about throwing money at your debt and hoping it shrinks—we're sharing a power-play using balance transfers to outsmart sky-high interest rates. By swooping in with zero percent introductory offers, you could slice through your debt like a hot knife through butter. But beware, this isn't a game for rookies; a sharp eye for the fine print and a robust credit score are key. We're pulling back the curtain on our own money-saving escapades, revealing how even the most daunting student loans can be tamed by transferring to a cunningly chosen credit card.
Put on your financial strategist hat because this episode is a master class in managing your money like a Wall Street pro. We don't stop at just tackling debt; we're also illuminating how you can parlay those savings into investment triumphs. Imagine redirecting dollars from your debt snowball into a growing Roth IRA nest egg—now that's what we call financial wizardry. Justin and I aren't just preaching theory; we've lived it, and we're laying out our blueprint so you can too. So gear up for insights that could redefine your financial future, and join us for a journey that could lead you to a land of prosperity and security.
Welcome to the Balanced Blueprints podcast, where we discuss the optimal techniques for finances and health and then break it down and create an individualized and balanced plan. I'm your host, justin Gaines, here with my co-host, john Prober. In this week's episode, John and I discuss a hack to help accelerate the speed of getting out of credit card debt, or getting out of. You could really use it for any type of debt. So we hope you enjoy this episode and thank you for listening. So the trick that we're going to talk about I've only ever used it with clients for credit cards, but realistically you could use it for anything. It would accelerate any sort of debt pay down if you're trying to push more towards eliminating those debts and we've talked about this before. So when I say it, you're going to be like, oh yeah. So it's the classic if your credit's not completely garbage and you're not completely maxed out on all of your debts, then you can do this. But if your credit score is 650 or lower, you're probably not going to be able to do this. And if you're totally maxed out on all of your credit, you probably won't be able to do this. But if you're starting on your financial journey, you're realizing, oh wow, I have built up some credit card debt or I've built up some bad debt that I want to snowball down or just get rid of a little bit quicker. This is a way to knock out the interest, and so then you would be paying zero percent interest and paying down faster because you're not paying any interest.
Speaker 1:
Because a lot of times that's the biggest hurdle with credit cards is, you know, I mean with credit card rates. Right now I just pulled up and looked at my credit card rates before, you know, we went on this. Now I don't carry a balance on my credit card, so I'm not actually paying these rates. But of the three credit cards I have, they're all within one percentage point of each other and they range from 25.5% to 26% Pesky. So you're at over 2% per month that you're paying an interest, which means if you have a $10,000 balance of credit, you know, if you're carrying a $10,000 balance on your credit card, you're going to be paying every single month $200. So your minimum is going to be, you know, $225, $250. $25, $250. And if you have this all in one credit card, then it's not as much of a headache because it's very easy to organize. But say you're trying to pay that down and you're paying $400 a month on it, only $200 of that's going to the principal.
Speaker 1:
So what I recommend clients do is, if you've made two or three $ hundred dollar monthly payments and you know that you can make those payments, what I tell clients to do is look for a good balance transfer card that has a zero percent introductory rate. Apply for it, see what limit you get, what they'll approve you for if you're able to get the limit to the same extent that you have the debt. So you know, if you have ten thousand dollars in credit card debt, if you can get a ten thousand dollar limit, that's honestly the best case scenario, because then what you would do is you would do a balance transfer from your current credit card that has a ten thousand dollar limit at 25 interest and you'd move that over to this credit card. That's an introductory zero percent interest and what that does is now you can continue usually those introductory rates are.
Speaker 1:
You know anywhere from 12 to 18 months that you're paying and so you'd want to make sure that you're going to be able to pay off whatever you're moving over. You want to make sure you're going to pay off that full amount. So in in this example let's say it's an 18-month you're paying $400 a month currently, so that's $7,200. So you wouldn't be able to pay off the full $10,000. You could move the full $10,000 and then at the end you're only going to get hit with a little bit of interest. But you want to read the fine print on that, because sometimes these introductory rates, if you move the full amount over, it only is zero percent interest. If you pay it all off before it ends, sometimes they'll back charge you the interest. Yeah, you want. Yeah, you want to. You want to read the fine print on these, but that's why I want you to make a couple of payments that you've made. So if you're paying $400, you're going to get hit with the $200 in interest those first couple of payments.
Speaker 1:
But you want to make sure that you're able to actually hit these so that you know whatever amount you move over will be able to be paid. So in this example, you got approved for $10,000 limit. You have $10,000 in debt. You're paying four hundred dollars a month. What you could do is move seventy two hundred dollars over to the zero balance, the zero, uh, zero, zero interest credit card. Continue to pay the four hundred dollars every month and then you're going to make your minimum payments on the other card, so you're going to pay 400 and then the remaining 2800 that you have on the other card. Continue to make your minimum payments on the other card, so you're going to pay $400, and then the remaining $2,800 that you have on the other card. Continue to make the minimum payment, because that's going to slowly chip away at the principal, but also pay off the interest and not get you any penalties on a regular card. If you had just left it there and continued to pay $400 over 18 months, you would have only made, you know, somewhere in the ballpark of $4,000 of progress versus $7,200 of progress. This way, and then a lot of times, what you'll end up with is once you get outside of that introductory rate, a lot of these cards, after six months, eight months, they will allow you to do it again. They'll give you like a promo where they'll say okay, you know, because you've got a loyal customer, here is your promo rate.
Speaker 1:
You can now move up to five thousand dollars for a four percent fee and then you don't have to pay it off and they usually give you the. They don't tell you how many months it is. You have to calculate that. They'll tell you the month in the year that you don't have to pay till.
Speaker 1:
Yeah, and so if you get one of those, then you pay the four percent fee and move over the rest of the twenty eight hundred dollars or you know whatever's left, because you were paying the minimum. So that should have come down a little bit. Otherwise you're just going to apply the $400, continue to apply the $400, which is going to move a lot faster because you're only paying on 25% interest on a smaller principal balance. So it does allow you to move things a lot faster because you've knocked out that massive interest rate. So that's the concept in a whole, and the reason why I say it primarily applies to credit cards is because you're going to see the needle move a lot faster if you're doing this with credit cards than you will if you take, you know, say, your student loan.
Speaker 1:
So I have my financial calculator up and all my numbers up, so like my, my student loans range from, you know, three and a half to 5%, and so if you did the same same strategy with those, it's not really going to make that big of a difference because you're not paying that much on a monthly basis or even on an annual basis. You're not paying that much. However, if you could knock out, if you know, you know, if, say, you're in the process of just clearing out debts and you're trying to get rid of your debts and you take that same person, he's paying $400 a month. He or she is paying $400 a month. They've cleared out this credit card. You know, say we're two years into it, cleared out $10,000 worth of debt and now you want to continue to make good habits. So you have that $400.
Speaker 1:
If you get another promo, you could say you know what, let's move. You know, say it's a 12-month 0% interest promo but there's a 4% fee. You have to remember the 4% fee because my student loans that are at 3.51% or any of the ones that are at or below four percent, it really doesn't make sense to pay that fee. But the one that's at five percent it's really only it's two, two that are at five percent. I could do the zero dollar transfer and then pay those off and get a one percent savings there. Yeah, doesn't so much help because it's only 1%. It's not as big of a move, honestly, for those numbers I would probably just invest the $400 a month into a Roth or into an IRA investment account just because you're going to make a higher rate of return.
Speaker 1:
But credit card debts the reason I am so adamant on getting rid of those is, you know, you're just not going to consistently make those rates of return in the market. You're not going to hit 20 percent, 25 percent. You might have, you know, over a 40 to 50 year investment. You know retirement planning and investment cycles. You might hit two, maybe three, 20, 30 percent years, but generally speaking you're not going to hit those. Maybe three, 20, 30% years, but generally speaking you're not going to hit those. So you know the really the strategy applies to credit cards. Maybe if you have like a really high interest rate on a personal loan or car, car payments can get up there. So you might have, you know, seven, eight percent on a car you could pay down this way. The other thing I have seen people do is if they have a mortgage that they want to pay a little bit extra towards this. Way actually works where you you get double the effect here, because you're taking out if you're early in a 30-year mortgage.
Speaker 1:
you're paying a lot in interest. Primarily, most of your payment is going towards interest, so your payment is going to remain the same. Don't change your payment, but take out $7,200 worth of principal out of that mortgage. Pay that with the $400. Continue to make your regular payment with the mortgage. Continue to make your regular payment with the mortgage and you will have just moved a good portion of your payment from interest over to principal, and so your pay down will be much faster because your monthly payments are paying down plus the $7,200 that you drew out of it.
Speaker 2:
Right, right, that makes sense. And the other thing too, isn't credit card? Is credit card debt the most common one?
Speaker 1:
Credit card debt, I do believe, is the most common one. The other thing, too is credit card debt the most common one? Credit card debt, I do believe, is the most common one. The other thing that I'll say is credit card debt is the worst debt that you can have. So that's why any time that I have a client that has credit card debt in their balance sheet, immediately that's what I go after and tackle, just because I mean, it's impossible to pay 25% in interest and get ahead.
Speaker 2:
Yeah, yeah, that makes sense for that. And then my other thought that came up for question was there's not a transfer fee when you're initially doing it right, only if it's like that promo part.
Speaker 1:
Right. Typically, the initial transfer doesn't have a fee.
Speaker 1:
And the reason credit card companies do this is they want you, because I get the promos all the time and there's times that I'll actually use it for my business, where I'll take that 0% interest and then go and buy something with the business and then which actually brings up a really good point that I'll talk about next but I'll go and buy something with the business and then pay that 4% fee and then not have to pay a larger fee and just pay that off within the year. No big deal.
Speaker 2:
The point that I was just reminded of, because I learned this the hard way.
Speaker 1:
The first time I ever did that with my credit card is, if you use, say, you're paying a lot of your regular bills, you're paying your internet bill, your electricity, you know, maybe some monthly subscriptions that you have on a credit card and you do the $0 transfer on that credit card. Once you do a $0 transfer, the 0% interest or the 0% interest transfer, the 0% interest portion of your balance will be paid first. So if you charge, what that means is if I take a credit card and I transfer ten thousand dollars onto that card at zero percent interest plus the four percent fee, but zero percent interest while it's happening, and then I charge a hundred dollars a month interest while it's happening, and then I charge $100 a month for utilities internet, that sort of stuff that $100 a month is going to be charged interest and it's going to be charged interest until you pay down the 0% number.
Speaker 2:
Because it's act like it's on top of it.
Speaker 1:
Right, because, if you think about it, the credit card company is not going to allow you to just carry this zero percent interest balance forever. The reason they offer you this benefit is they want you to put a balance on there, get used to having a balance there and then over time, they're going to make their money. Now, if you're a really good customer, because credit card companies like I don't want to. I don't want to make credit card companies look like a villain here, because at the end of the day, credit card companies do a lot of really good things for individuals that use them.
Speaker 1:
Where credit cards become a problem is when you carry a balance on them. Credit card companies make money. Even if you do what we recommend and don't carry a balance. If you pay it off every single month and you never pay interest, credit card companies are still making money Because when you swipe that card, the business is paying a transaction fee, so they're making money off those transaction fees. They make money. They have that 4% fee, so that when you do this balance transfer, they're still making a little bit of money.
Speaker 2:
And so even with a really good customer.
Speaker 1:
They want you to do that balance transfer because they're going to make 4% additional than they would have made, and so where they become an issue is if you're carrying that balance, you know. The other thing that I like about credit cards, as I've talked about in past episodes, is it's a lot easier to reverse a transaction if there's fraud on a credit card than there is on a bank card. They have, like, my tsa pre-check gets paid for by my credit card. You just have to run it on the. I have a specific card that has travel benefits. It's an international. No, no international transaction fees. A lot of those cards that have no international transaction fees. If you use that card for your TSA pre-check, you can then just reach out to customer service and they'll apply a credit for the amount of it. Typically it's limited to $80 every five years, but the reason it's limited to $80 every five years is they only want to pay for it once and then it's good for five years.
Speaker 1:
So at the end, once it comes up for renewal, you'll be able to buy it again and they'll pay for it again. So you get tsa pre-check effectively for free just by having one of these cards. Now they do that because you're going to run the card when you're overseas and they're going to get their fees from atms and businesses that you're running your transactions with, so they're able to make money in other ways. They make their money. They want to make their money off those transaction fees. That's why they charge you such a high interest rate is they don't want you carrying a balance. That's not as profitable for them. They make. They make faster money, easier money if you're not running a balance.
Speaker 2:
So that's true you know the high interest rate isn't because they are money hungry.
Speaker 1:
There's definitely a portion of it that is because they're money hungry. In my opinion, however, the primary reason why interest rates are so high on credit cards is they use the absolute max that they're legally allowed before they become a loan shark, but they use the highest limit they're allowed, and it's in order to penalize you, so that you do not want to carry a balance, because that's not where they make most of their money.
Speaker 2:
Yeah, that makes sense too. And why they give you so much incentives of cash back and stuff, because then you'll use that card more often. So wipe it more.
Speaker 1:
Right, because a lot of times the best cards out there give you one and a half to two percent back, but they're charging two and a half, three percent to the business that's, you know, running, that's accepting that card. So you know you spend a thousand dollars and they're making one percent on that after they give you, you know, the one and a half two percent cash back to you yeah so you know they're making $10 just off of that, which doesn't sound like a lot.
Speaker 1:
but if you take that $10 and you apply that over a million people who have that card across the world, you just made $10 million off of a thousand dollars in monthly transactions Wild and like that's. That's where they want to make their money.
Speaker 2:
Right, and that's the other thing too, which I know we're kind of just. We both know this, especially you, and it's just assumed, but I just want to bring it up to. That's why this trick that you're mentioning seems like one to me that is so important to work with someone, because if you've probably gotten yourself in credit card debt, it's like it's kind of like going you're a gambler and then you're kind of going to the casino to win money. It's like tempting with another credit card.
Speaker 1:
So I would imagine yeah, and I'm glad you brought this up, because I actually, um, I left a piece out that I typically use with clients, so I, if I'm working with a client and they've worked with me and they're paying me a lot of times. I'll take on this expense. I think I've bought like 20 of these in the last two years, um, but if it's somebody that I'm just doing pro bono work, I tell them to spend the 20 bucks 10 bucks, but if you go to, amazon.
Speaker 1:
you can just pull up, it's a, it's a. Typically it's called a phone safe, um, but it can be your credit card safe, and so it's just a tiny little safe and you put your credit card in there and you lock it and it's got a timer on there on how long it can be locked.
Speaker 1:
for Now most of them will only go to 30 days. But if you're working, you know, if you have a partner, you have a friend in your life who knows that you know that you can be transparent with you, can just let, just let them know like, hey, you're going to come over, we're going to have a drink or whatever we do, and you're just going to reset this for me because I need to not have this. That's, if you don't have any self-control at all. If you have the self-control to be like I know I'm trying to get out of this and I'm locking these so I don't use them, in that case then you just, when it gets unlocked after days, just put a reminder in your phone to relock it.
Speaker 1:
What a lot of my clients say is that after my credit card's unlocked for 30 days, I don't even they don't even put the second reminder in there, because they forget that they have the card, they forget that it's there and they're starting to build that habit of I don't have the card because it's locked, let me take a day or two to think about this, and then a day or two passes and they didn't actually think about it because they didn't actually want it that bad, it was just that emotional impulse, and so I do recommend locking up your credit cards, or it's very easy to replace your cards. So you could cut your card up because you're not supposed to be using it anyways. If we're in this plan, you're not really supposed to be using it anyways. Cut it up and then, when you get it paid off in a year, request a replacement card because it was damaged or stolen.
Speaker 2:
Yeah, and if you request it, because it was damaged, your credit card numbers won't change.
Speaker 1:
The only thing that will change is the expiration date and the security code on the back. So you won't have to worry about like updating your subscriptions and all those things yeah, that's a good idea you know. So you're not supposed to be using the card, so cutting it up really shouldn't be an issue for you right you know, emotionally maybe and that's if you don't.
Speaker 1:
You know, if that's if you don't want to spend the 10 or 20 dollars for this little lock safe. Otherwise, get the lock safe, spend the 10, 20 bucks, throw it in there. Um, spend the 10, 20 bucks, throw it in there. To me, the 10 or 20 dollars that you're going to spend on that is worth it because it's saving you from spending 30, 40, 50, 60 dollars. I mean, you can't fill up your tank for less than 20 dollars, and I'm not saying that you shouldn't be spending money to fill up your tank. That's something you have to spend. But in this situation, maybe you transfer to using a bank card to pay for your gas until you have these things figured out.
Speaker 2:
And then the only other thing that I can think of is I know we talked about this mainly for credit cards, but at the beginning we were talking about if you had like a student loan, so this might work too. If you just go, it's not like the after you did it pro bono period, right, because then there's not that 4% fee usually, so you could just do it and you'd save a lot, or no.
Speaker 1:
You're not going to save a lot just because the majority of people aren't going to get approved for more than a $10,000 limit.
Speaker 2:
Yeah, and loans are yeah.
Speaker 1:
So if you're paying you know, say, you're even paying on the high end you know you might be paying 7%, and so if you're getting it paid off a year earlier by doing this, you're talking about saving $800. And that's if you have a $10,000 limit and you have $10,000 of student loans that you're moving over. So it doesn't make a huge difference, a huge difference. However, you know it is something that I mean.
Speaker 1:
Until we recorded this podcast, I haven't used this trick in a while. I mean, I've used it for clients, but I haven't used it for myself in a while. Until we recorded this podcast, I didn't really think to use it myself. But as we were recording, I was like you know what this actually could benefit me for. You know these four or $5,000 credits limits that I have for these student loans that are at 5%, 6%, because I know my fee is 4%. So I don't have any of six. I have 4.8 is the highest. But I have a personal loan from some home renovations that I did that's at 7.99. So maybe that's a good one to let's do a $0 transfer and transfer off of that card and then pay that down a lot faster.
Speaker 1:
There's just little things like that that you don't really think about until you have a conversation like this and you're like, oh, that actually could help too. And again, okay, so we're talking about a two percent difference on 10 grand, so we're only talking about 200 bucks. But for somebody like me who has the habits down and it's really about optimizing at this point, what I'm going to do is I'm going to take that 200, I'm going to throw that into an investment and then so not only did I save $200, that $200 now on average, my Roth makes, you know, a 10% rate of return each year on average, so that $200 over the course of, you know, to retirement years you're talking about doubling every seven years. I have another easily 40 years until I retire You're going to get six doublings, just under six doublings, so that $200 is going to turn to $400, $800, $16, $32, $64, $12, $8. So it's going to be somewhere. It's going to be just under $12, $8 in theory, so that $200 turns into $12,000 for retirement.
Speaker 2:
Right, but that also goes along the lines too. I like what you said before. If you're more of the common folk, it's like if all that headache is going to save you $200, like you said, max out your Roth first.
Speaker 1:
Do some other investments instead of getting so nitty gritty Like you've already done that, obviously, so you can get nitty gritty but Right, yeah, I mean I'm maxing out my Roth and you know, and that's where working with somebody is helpful, because what may happen here is so like that personal loan for me is $431 and change every single month, and so for average individual who's not running these numbers like I am, you know, once a month what may happen is, you know, say that it's the same person.
Speaker 1:
They're paying $400 towards debt consolidation. They've been doing that. They can now knock this out, save $200 in interest, and now they're going to be able to snowball here, because they had $431 they were paying towards this loan, $400 that they're going to be paying towards credit cards. By now eliminating this and bringing it into the debt consolidation piece, you now have $831 of monthly payments that you were used to paying, so now you're going to knock out that $10,000 a lot faster. So you just take the $831, knock out that $10,000 in 11 months, yeah, and then right, does that work? No, it'd be 12 and a half months. So in a year, though, you knock that out now, and now, after that, you have enough to max out your Roth, which $7,000 a year is what you can contribute to your Roth as of 2024.
Speaker 1:
So that's $548 a month, I believe. No, it's not. $548 is what I used, because I was when I reallocated it. It's, let's see, 7,000 by 12, $583 a month. This person had $831 a month that they were putting towards debt consolidation. So now you have 200, you're maxing out your Roth now and you have $248 to put towards an additional investment account, or you have maxed out your Roth and you have $248 to spend.
Speaker 1:
Catch yourself on the top and going this way to slip In theory, that's from taking somebody who had $10,000 of credit card debt and ten thousand dollars on a personal loan and, over the course of three years, with this strategy, went from not being able to see the light at the end of the tunnel and paying minimums on a credit card, or a little bit more than minimums, and then, over the course of three years, eliminated that credit card debt, eliminated this personal loan debt and started maxing out a roth and having an extra 250 a month in an income that's a glow up to spend, you know, and I think I think the part that I want to harp on the most, though, is that three years, you know I mean it doesn't happen overnight, like if you know and that's that's just to eliminate twenty thousand dollars worth of credit card.
Speaker 1:
That, and assuming that you have an extra $400 to throw.
Speaker 2:
Well, it wouldn't be extra $400.
Speaker 1:
It'd be like an extra $200 a month to put towards this. You know you may not have that. There may be other things you have to do. You may not be able to be in a position, because of your credit and everything, to even use this strategy. But if you're in those positions, try and find somebody who will have a conversation with you Reach out to me even and let's have a conversation about how can we get your credit? What should we tackle? First to get your credit score to go up so that then you can be approved for this and then we can start working faster.
Speaker 1:
Because ultimately, if you're using your credit journey strategy and your financial strategy properly, it'll be hardest day one and then, as you slowly work towards these things, it'll get easier because you're moving hurdles out of the way and then, eventually, your progress is just going to compound exponentially and before you know it, you'll be credit card debt free within five years, depending on what your limits are and everything. But within five years you'll be in a much different financial position putting towards retirement, building so that you have a very nice financial future from a position that looked like very doom and gloom. How am I ever going to have anything? How am I ever going to be able to buy a house? How am I ever going to be able to do any of this stuff? Nice, that about sums it up. Um, you know, that's the basics on how to use a zero, zero percent interest credit card limit or credit card transfer for, in order to pay down your debts and just work towards, you know, a more balanced financial position. I hope you enjoyed the episode and thank you for listening.
Speaker 2:
Thanks for listening to our podcast.
Speaker 1:
We hope this helps you on your balance freedom journey.
Speaker 2:
Please share your thoughts in the comments section below.